Secession of the Successful

By Robert B. Reich; Robert B. Reich teaches political economy at Harvard University. This article is adapted from his book, "The Work of Nations: Preparing Ourselves for 21st-Century Capitalism," to be published in March by Alfred A. Knopf.

Published: January 20, 1991

The idea of "community" has always held a special attraction for Americans. In a 1984 speech, President Ronald Reagan celebrated America's "bedrock" -- "its communities where neighbors help one another, where families bring up kids together, where American values are born." Gov. Mario M. Cuomo of New York, with a very different political leaning, has been almost as lyrical. "Community . . . is the reality on which our national life has been founded," he said in 1987.

There is only one problem with this picture. Most Americans no longer live in traditional communities. They live in suburban subdivisions bordered by highways and sprinkled with shopping malls, or in tony condominiums and residential clusters, or in ramshackle apartment buildings and housing projects. Most of them commute to work and socialize on some basis other than geographic proximity. And most people pick up and move to a different neighborhood every five years or so.

But Americans generally have one thing in common with their neighbors: they have similar incomes. And that simple fact lies at the heart of the new community. This means that their educational backgrounds are likely to be similar, that they pay roughly the same in taxes, and that they indulge in the same consumer impulses. "Tell me someone's ZIP code," the founder of a direct-mail company once bragged, "and I can predict what they eat, drink, drive -- even think."

Americans who own their homes usually share one political cause with their neighbors: a near obsessive concern with maintaining or upgrading property values. And this common interest is responsible for much of what has brought neighbors together in recent years. Complete strangers, although they may live on the same street or in the same condominium complex, suddenly feel intense solidarity when it is rumored that low-income housing will be constructed in their midst or that a poorer school district will be consolidated with their own.

The renewed emphasis on "community" in American life has justified and legitimized these economic enclaves. If generosity and solidarity end at the border of similarly valued properties, then the most fortunate can be virtuous citizens at little cost. Since most people in one neighborhood or town are equally well off, there is no cause for a guilty conscience. If inhabitants of another area are poorer, let them look to one another. Why should we pay for their schools?

So the argument goes, without acknowledging that the critical assumption has already been made: "we" and "they" belong to fundamentally different communities. Through such reasoning, it has become possible to maintain a self-image of generosity toward, and solidarity with, one's "community" without bearing any responsibility to "them" -- the other "community."

America's high earners -- the fortunate top fifth -- thus feel increasingly justified in paying only what is necessary to insure that everyone in their community is sufficiently well educated and has access to the public services they need to succeed.

LAST YEAR, THE TOP FIFTH of working Americans took home more money than the other four-fifths put together -- the highest portion in postwar history. These high earners will relinquish somewhat more of their income to the Federal Government this year than in 1990 as a result of last fall's tax changes, although considerably less than in the late 1970's, when the tax code was more progressive. But the continuing debate over whether the wealthy are paying their fair share of taxes obscures a larger issue, with more profound implications for America: the fortunate fifth is quietly seceding from the rest of the nation.

This is occurring gradually, without much awareness by members of the top group -- or, for that matter, by anyone else. And the Government is speeding this process as Washington shifts responsibility for many public services to state and local governments.

The secession is taking several forms. In many cities and towns, the wealthy have in effect withdrawn their dollars from the support of public spaces and institutions shared by all and dedicated the savings to their own private services. As public parks and playgrounds deteriorate, there is a proliferation of private health clubs, golf clubs, tennis clubs, skating clubs and every other type of recreational association in which costs are shared among members. Condominiums and the omnipresent residential communities dun their members to undertake work that financially strapped local governments can no longer afford to do well -- maintaining roads, mending sidewalks, pruning trees, repairing street lights, cleaning swimming pools, paying for lifeguards and, notably, hiring security guards to protect life and property. (The number of private security guards in the United States now exceeds the number of public police officers.)

Of course, wealthier Americans have been withdrawing into their own neighborhoods and clubs for generations. But the new secession is more dramatic because the highest earners now inhabit a different economy from other Americans. The new elite is linked by jet, modem, fax, satellite and fiber-optic cable to the great commercial and recreational centers of the world, but it is not particularly connected to the rest of the nation.

That is because the work this group does is becoming less tied to the activities of other Americans. Most of their jobs consist of analyzing and manipulating symbols -- words, numbers or visual images. Among the most prominent of these "symbolic analysts" are management consultants, lawyers, software and design engineers, research scientists, corporate executives, financial advisers, strategic planners, advertising executives, television and movie producers, and other workers whose job titles include terms like "strategy," "planning," "consultant," "policy," "resources" or "engineer."

These workers typically spend long hours in meetings or on the telephone and even longer hours in planes or hotels -- advising, making presentations, giving briefings and making deals. Periodically, they issue reports, plans, designs, drafts, briefs, blueprints, analyses, memorandums, layouts, renderings, scripts or projections. In contrast with people whose jobs tend to be tedious and repetitive, symbolic analysts find their work varied and intellectually challenging. In fact, the work is often enjoyable.

These symbolic analysts are in ever greater demand in a world market that places an increasing value on identifying and solving problems. Requests for their software designs, financial advice or engineering blueprints come from all parts of the globe. This largely explains why most (but by no means all) symbolic analysts have become wealthier, even as the ever-growing worldwide supply of unskilled labor continues to depress the wages of other Americans.

Successful Americans have not completely disengaged themselves from the lives of their less fortunate compatriots. Some devote substantial resources and energies to helping the rest of society, not through their tax payments, but through voluntary efforts. "Generosity is a reflection of what one does with his or her resources -- and not what he or she advocates the government do with everyone's money," Ronald Reagan said in 1984.

The argument is fair enough. Government is not the only device for redistributing wealth. In his speech accepting the Presidential nomination at the Republican National Convention in 1988, George Bush said that the real magnanimity of America was to be found in a "brilliant diversity" of private charities, "spread like stars, like a thousand points of light in a broad and peaceful sky."

No nation congratulates itself more enthusiastically on its charitable acts than America; none engages in a greater number of charity balls, bake sales, benefit auctions and border-to-border hand holdings for good causes. Much of this is sincerely motivated and admirable.

But close examination reveals that many of these acts of benevolence do not help the needy. Particularly suspect is the private giving of those in the top income-tax bracket. Studies have revealed that their largess does not flow mainly to social services for the poor -- to better schools, health clinics or recreational centers. Instead, most voluntary contributions of wealthy Americans go to the places and institutions that entertain, inspire, cure or educate wealthy Americans -- art museums, opera houses, theaters, orchestras, ballet companies, private hospitals and elite universities.

And even these charitable contributions are relatively skimpy. Last year, American households with incomes of less than $10,000 gave an average of 5.5 percent of their earnings to charity or to a religious organization; those making more than $100,000 a year gave only 2.9 percent. After the 1986 tax-code overhaul reduced the benefits of charitable giving, the very rich became even stingier. According to Internal Revenue Service data, taxpayers earning $500,000 or more slashed their average donations to $16,062 in 1988 from $47,432 in 1980 .

Corporate philanthropy is following the same general pattern. In recent years, the largest American corporations have been sounding the alarm about the nation's fast deteriorating primary and secondary schools. Few are more eloquent and impassioned about the need for better schools than American executives. "How well we educate all of our children will determine our competitiveness globally, and our economic health domestically, and our communities' character and vitality," said a report of The Business Roundtable, a New York-based association of top executives.

Accordingly, there are numerous "partnerships" between corporations and public schools: scholarships for poor children qualified to attend college, and programs in which businesses adopt individual schools by making conspicuous donations of computers, books and, on occasion, even money. That such activities are loudly touted by corporate public relations staffs should not detract from the good they do.

Despite the hoopla, business donations to education and charitable causes actually tapered off markedly in the 1980's, even as the economy boomed. In the 1970's, corporate giving to education jumped an average of 15 percent a year. In 1990, however, giving was only 5 percent over that in 1989; in 1989 it was 3 percent over 1988. Moreover, most of this money goes to colleges and universities -- in particular, to the alma maters of symbolic analysts, who expect their children and grandchildren to follow in their footsteps. Only 1.5 percent of corporate giving in the late 1980's was to public primary and secondary schools.

Notably, these contributions have been smaller than the amounts corporations are receiving from states and communities in the form of subsidies or tax breaks. Companies are quietly procuring such deals by threatening to move their operations -- and jobs -- to places around the world with a more congenial tax climate. The paradoxical result has been even less corporate revenue to spend on schools and other community services than before. The executives of General Motors, for example, who have been among the loudest to proclaim the need for better schools, have also been among the most relentless in pursuing local tax abatements and in challenging their tax assessments. G.M.'s successful efforts to reduce its taxes in North Tarrytown, N.Y., where the company has had a factory since 1914, cut local revenues by $1 million in 1990, part of a larger shortfall that forced the town to lay off scores of teachers.

THE SECESSION OF the fortunate fifth has been most apparent in how and where they have chosen to work and live. In effect, most of America's large urban centers have splintered into two separate cities. One is composed of those whose symbolic and analytic services are linked to the world economy. The other consists of local service workers -- custodians, security guards, taxi drivers, clerical aides, parking attendants, sales people, restaurant employees -- whose jobs are dependent on the symbolic analysts. Few blue-collar manufacturing workers remain in American cities. Between 1953 and 1984, for example, New York City lost about 600,000 factory jobs; in the same interval, it added about 700,000 jobs for symbolic analysts and service workers.

The separation of symbolic analysts from local service workers within cities has been reinforced in several ways. Most large cities now possess two school systems --a private one for the children of the top-earning group and a public one for the children of service workers, the remaining blue-collar workers and the unemployed. Symbolic analysts spend considerable time and energy insuring that their children gain entrance to good private schools, and then small fortunes keeping them there -- dollars that under a more progressive tax code might finance better public education.

People with high incomes live, shop and work within areas of cities that, if not beautiful, are at least esthetically tolerable and reasonably safe; precincts not meeting these minimum standards of charm and security have been left to the less fortunate.

Here again, symbolic analysts have pooled their resources to the exclusive benefit of themselves. Public funds have been spent in earnest on downtown "revitalization" projects, entailing the construction of clusters of post-modern office buildings (complete with fiber-optic cables, private branch exchanges, satellite dishes and other communications equipment linking them to the rest of the world), multilevel parking garages, hotels with glass-enclosed atriums, upscale shopping plazas and galleries, theaters, convention centers and luxury condominiums.

Ideally, these complexes are entirely self-contained, with air-conditioned walkways linking residences, businesses and recreational space. The lucky resident is able to shop, work and attend the theater without risking direct contact with the outside world -- that is, the other city.

Carrying the principle a step further, several cities have begun authorizing property owners in certain affluent districts to assess a surtax on local residents and businesses for amenities unavailable to other urban residents, services like extra garbage collections, street cleaning and security. One such New York district, between 38th and 48th Streets and Second and Fifth Avenues, raised $4.7 million from its residents in 1989, of which $1 million underwrote a private force of uniformed guards and plainclothes investigators. The new community of people with like incomes and with the power to tax and enforce the law is thus becoming a separate city within the city.

When not living in urban enclaves, symbolic analysts are increasingly congregating in suburbs and exurbs where corporate headquarters have been relocated, research parks have been created, and where bucolic universities have spawned entrepreneurial ventures. Among the most desirable of such locations are Princeton, N.J.; northern Westchester and Putnam Counties in New York; Palo Alto, Calif.; Austin, Tex.; Bethesda, Md., and Raleigh-Durham, N.C.

Engineers and strategists of American auto companies, for example, do not live in Flint or Saginaw, Mich., where the blue-collar workers reside; they cluster in their own towns of Troy, Warren and Auburn Hills. Likewise, the vast majority of the financial specialists, lawyers and executives working for the insurance companies of Hartford would never consider living there; after all, Hartford is the nation's fourth-poorest city. Instead, they flock to Windsor, Middlebury, West Hartford and other towns that are among the wealthiest in the country.

This trend, too, has been growing for decades. But technology has accelerated it. Today's symbolic analysts linked directly to the rest of the globe can choose to live and work in the most pastoral of settings.

The secession has been encouraged by the Federal Government. For the last decade, Washington has in effect shifted responsibility for many public services to local governments. At their peak, Federal grants made up 25 percent of state and local spending in the late 1970's. Today, the Federal share has dwindled to 17 percent. Direct aid to local governments, in the form of programs introduced in the Johnson and Nixon Administrations, has been the hardest hit by budget cuts. In the 1980's, Federal dollars for clean water, job training and transfers, low-income housing, sewage treatment and garbage disposal shrank by some $50 billion a year, and Washington's share of spending on local transit declined by 50 percent. (The Bush Administration has proposed that states and localities take on even more of the costs of building and maintaining roads, and wants to cut Federal aid for mass transit.) In 1990, New York City received only 9.6 percent of all its revenue from the Federal Government, compared with 16 percent in 1981.

States have quickly transferred many of these new expenses to fiscally strapped cities and towns, with a result that by the start of the 1990's, localities were bearing more than half of the costs of water and sewage, roads, parks, welfare and public schools. In New York State, the local communities' share has risen to about 75 percent of these costs.

Cities and towns with affluent inhabitants can bear these burdens relatively easily. Poorer ones, faced with the twin problems of lower incomes and greater demand for social services, have had far more difficulty. And as the gap between the richest and poorest communities has widened, the shift in responsibility for public services to cities and towns has functioned as another means of relieving wealthier Americans of the cost of aiding less fortunate citizens.

The result has been a growing inequality in basic social and community services. While the city tax rate in Philadelphia, for example, is about triple that of communities around it, the suburbs enjoy far better schools, hospitals, recreation and police protection. Eighty-five percent of the richest families in the greater Philadelphia area live outside the city limits, and 80 percent of the region's poorest live inside. The quality of a city's infrastructure -- roads, bridges, sewage, water treatment -- is likewise related to the average income of its inhabitants.

The growing inequality in government services has been most apparent in the public schools. The Federal Government's share of the costs of primary and secondary education has dwindled to about 6 percent. The bulk of the cost is divided about equally between the states and local school districts. States with a higher concentration of wealthy residents can afford to spend more on their schools than other states. In 1989, the average public-school teacher in Arkansas, for example, received $21,700; in Connecticut, $37,300.

Even among adjoining suburban towns in the same state the differences can be quite large. Consider three Boston-area communities located within minutes of one other. All are predominantly white, and most residents within each town earn about the same as their neighbors. But the disparity of incomes between towns is substantial.

Belmont, northwest of Boston, is inhabited mainly by symbolic analysts and their families. In 1988, the average teacher in its public schools earned $36,100. Only 3 percent of Belmont's 18-year-olds dropped out of high school, and more than 80 percent of graduating seniors chose to go on to a four-year college.

Just east of Belmont is Somerville, most of whose residents are low-wage service workers. In 1988, the average Somerville teacher earned $29,400. A third of the town's 18-year-olds did not finish high school, and fewer than a third planned to attend college.

Chelsea, across the Mystic River from Somerville, is the poorest of the three towns. Most of its inhabitants are unskilled, and many are unemployed or only employed part time. The average teacher in Chelsea, facing tougher educational challenges than his or her counterparts in Belmont, earned $26,200 in 1988, almost a third less than the average teacher in the more affluent town just a few miles away. More than half of Chelsea's 18-year-olds did not graduate from high school, and only 10 percent planned to attend college.

Similar disparities can be found all over the nation. Students at Highland Park High School in a wealthy suburb of Dallas, for example, enjoy a campus with a planetarium, indoor swimming pool, closed-circuit television studio and state-of-the-art science laboratory. Highland Park spends about $6,000 a year to educate each student. This is almost twice that spent per pupil by the towns of Wilmer and Hutchins in southern Dallas County. According to Texas education officials, the richest school district in the state spends $19,300 a year per pupil; its poorest, $2,100 a year.

The courts have become involved in trying to repair such imbalances, but the issues are not open to easy judicial remedy.

The four-fifths of Americans left in the wake of the secession of the fortunate fifth include many poor blacks, but racial exclusion is neither the primary motive for the separation nor a necessary consequence. Lower-income whites are similarly excluded, and high-income black symbolic analysts are often welcomed. The segregation is economic rather than racial, although economically motivated separation often results in de facto racial segregation. Where courts have found a pattern of racially motivated segregation, it usually has involved lower-income white communities bordering on lower-income black neighborhoods.

In states where courts have ordered equalized state spending in school districts, the vast differences in a town's property values -- and thus local tax revenues -- continue to result in substantial inequities. Where courts or state governments have tried to impose limits on what affluent communities can pay their teachers, not a few parents in upscale towns have simply removed their children from the public schools and applied the money they might otherwise have willingly paid in higher taxes to private school tuitions instead. And, of course, even if statewide expenditures were better equalized, poorer states would continue to be at a substantial disadvantage.

In all these ways, the gap between America's symbolic analysts and everyone else is widening into a chasm. Their secession from the rest of the population raises fundamental questions about the future of American society. In the new global economy -- in which money, technologies and corporations cross borders effortlessly -- a citizen's standard of living depends more and more on skills and insights, and on the infrastructure needed to link these abilities to the rest of the world. But the most skilled and insightful Americans, who are already positioned to thrive in the world market, are now able to slip the bonds of national allegiance, and by so doing disengage themselves from their less favored fellows. The stark political challenge in the decades ahead will be to reaffirm that, even though America is no longer a separate and distinct economy, it is still a society whose members have abiding obligations to one another.